Barron’s Teresa Rivas Asks Traders To Check Out Wal-Mart (NYSE: WMT)

According to an article written by Teresa Rivas on Barron’s shareholders of Wal-Mart Stores WMT seem to be smiling after the company rolled back its forecasts for the fiscal second quarter. Yesterday, the company had reported its Q1 results, with EPS exceeding the expectations and guidance. However, WMT’s same-store sales fell by 1.4% and the mid-point of the company’s second-quarter earnings guidance fell short of the consensus. Despite mixed news, WMT’s shares moved up yesterday as the analyst Joel Bloomer of Morningstar said, "Wal-Mart's wide economic moat solidifies its leadership position. While this firm is unlikely to be a home-run investment, we expect the stock to perform relatively well as consumer incomes remain pressured and short-term adverse currency movements lessen, revealing solid performance in the international segment." With the US consumer, who is hit by high unemployment and dwindling stimulus funds, remaining focused on finding bargains, WMT, as a value brand, is benefiting. As a result, Wal-Mart's stock, which has been a laggard of late, is now expected to gain 17% next year. Citigroup's Deborah Weinswig said, "From an earnings perspective, we expect growth to be driven by market share gains [especially at the expense of supermarkets] and the growth of Wal-Mart's international operations, including acquisitions in new markets." Deborah had maintained her "outperform" rating on the company's stock following the earnings release. The company's profitability is set to improve, driven by "better inventory management, increased private label penetration, a keener merchandising program across the store and increased global sourcing." WMT, with over $26 billion in cash flows, good margin level and a 2.3% yield, has an impressive balance sheet. Moreover, it trades at just 12.4 times projected forward earnings per share, which is "15%-20% below global consumer/retail company peers with a similar growth and return on capital profile," the analyst Mark Miller of William Blair mentioned. Although the company’s fundaments and results are not exciting, trends show that WMT continues to be the king of discounters.